RIYADH: Roughly two-thirds of Saudi Arabia’s annual revenue is generated from oil exports. Low prices have forced the country to re-evaluate its 2016 spending plans.
The Kingdom of Saudi Arabia’s Ministry of Finance has outlined the country’s 2016 budget plans, revealing a plan to reduce spending next year due to low oil prices. The ministry expects to generate roughly $137 billion next year, a 15 percent decrease from the $162 billion earned in 2015. Low oil prices have already made a fiscal impact on Saudi Arabia. In 2015, the country recorded a record deficit of $98 billion.
The impact of low oil prices on Saudi Arabia’s 2016 plans were made clear through several strategies the ministry outlined in its 2016 guidance. The budget for the next fiscal year is adopted in the light of very low oil prices, the ministry said, adding that, “this budget also comes amid challenging international and regional economic and financial conditions, namely a global economic slowdown in growth.”
The ministry intends to implement several measures that will change the operational state of the country following the introduction of new leadership and the continued state of the commodity—oil—responsible for generating roughly two-thirds of the country’s annual revenue. Amongst the measures, the ministry will create a public finance unit that sets a budget ceiling. Typically, the country spends more than it budgets for during each fiscal year.
In 2016, wages, salaries and allowances will be cut. In 2015, wages, salaries, allowances and the like exceeded 50 percent of the approved budget expenses set at the beginning of the year.
And, the ministry said it will roll out a plan to change the country’s stance towards utility supply. The country currently provides subsidies for energy usage amongst citizens of the country, but next year, citizens will be required to pay for more services and energy costs then they typically do.
The ministry did not disclose any oil price range used to determine its 2016 budget plans.
Earlier this year, the International Monetary Fund released a report detailing the impace of low oil prices on the world’s largest crude oil producers. Oil exporting countries that will be most affected are Kuwait, Qatar, Iraq, Oman, Libya and Saudi Arabia, the IMF said, because most oil exporters need oil prices to be above $57 per barrel in order to cover government spending.
